User:Jaydavidmartin/A Brief History of Neoliberalism

A Brief History of Neoliberalism

Author	David Harvey
Language	English
Subject	Neoliberalism
Publisher	Oxford University Press
Publication date	2005
Media type	Print
Pages	254
ISBN	978-0-19-928326-2

A Brief History of Neoliberalism is a 2005 book by British economic geographer David Harvey tracing the geographic development of neoliberalism and arguing that neoliberalism was a deliberate effort by economic elites to entrench their class power. The book has been described as a neo-Marxist critique of neoliberalism.

Structure

The book is split into seven chapters.

• Chapter one ("Freedom's Just Another Word...") argues that neoliberalism is a ploy by global elites to retain power and extend capital.
• Chapters two ("The Construction of Consent") discusses how neoliberalism rose to political prominence, particularly in the United States and the United Kingdom.
• Chapter three ("The Neoliberal State") examines the role of the state within neoliberalism.
• Chapters four ("Uneven Geographic Developments") discusses the rise and effects of neoliberalism in several countries.
• Chapter five ("Neoliberalism 'with Chinese Characteristics'") discusses neoliberalism in China.
• Chapter six ("Neoliberalism on Trial") investigates the global effects of neoliberalism.
• Chapter seven ("Freedom's Prospect") examines public opposition to neoliberalism.

Summary

"It has been part of the genius of neoliberal theory to provide a benevolnet mask full of wonderful-sounding words like freedom, liberty, choice, and rights, to hide the grim realities of the restoration or reconstitution of naked class power."

Harvey characterizes 'neoliberalism' as "a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterised by strong private property rights, free markets, and free trade". However, he argues this definition is merely a cover for a conscious political project intended to reinforce the class power of economic elites. This effort is, according to Harvey, masked by a complex ideology that justifies economic inequality on the basis that it is necessary to encourage innovation and entrepreneurship, blames poverty on personal and cultural failings, and maintains that government economic intervention is a problem rather than a solution. He rejects arguments that neoliberalism is merely an "erroneous theory gone wild", as a number of economists like Joseph Stiglitz have contended, maintaining that it is a "utopian rhetoric masking a successful project for the restoration of ruling-class power".

Neoliberal policies, in Harvey's view, center around four focuses: the privatization and commodification of public assets, the emphasis on finance of a speculative and predatory kind as opposed to production, the management and manipulation of debt crises for the benefit of rich countries at the expense of poor ones, and the redistribution, within countries, of wealth and income from the lower to upper classes. He regards the fundamental economic ideas marshalled in support of neoliberalism to be monetarism, rational expectations, public choice theory, and supply-side economics.

The political rise of neoliberalism

Harvey argues that neoliberalism arose as a concerted effort by the "capitalist classes" to consolidate economic power. This effort was disguised in an ideology claiming to promote "individual freedoms", and advanced by corporations, the media, think tanks, universities, local institutions like schools, churches, and professional associations, and eventually national governments. According to Harvey, neoliberal power emerged gradually, slowly penetrating cultural ideas of "common sense" and establishing itself as a "natural" way for society to be organized.

Harvey argues that the political climate in the early 1970s was one that viewed powerful corporations, in alliance with interventionist states, as oppressive and overly powerful; popular consensus demanded greater individual rights, social justice, and the reform—or even revolutionary transformation—of corporations and the market system. However, Harvey argues this posed a threat to the capitalist classes, who then latched onto a pre-existing neoliberal ideology that had been propounded by economists like Friedrich Hayek and Milton Friedman. This ideology wedded the popular concern for individual rights with policies like deregulation and privatization, which Harvey argues was beneficial to the protection of capitalist class interests.

The United States

Harvey pins the earliest moment of neoliberalism's political rise in the United States to Lewis Powell's 1971 memo to the US Chamber of Commerce (a pro-business lobbying group), in which Powell argued that opposition to the US free enterprise system had gone too far and that "the time had come...for the wisdom, ingenuity, and resources of American business to be marshaled against those who would destroy it". He further argued that the Chamber should, in Harvey's words, "lead an assault upon the major institutions—universities, schools, the media, publishing, the courts—in order to change how individuals think" about corporations, the law, culture, and the individual.

Harvey notes that the Chamber quickly expanded its base from 60,000 firms in 1972 to over a 250,000 by 1982. Along with the National Association of Manufacturers, it amassed an "immense campaign chest to lobby Congress and engage in research". In 1972 the Business Roundtable was founded, and in subsequent years it became a powerful force of collective pro-business campaigning. Think tanks like the Heritage Foundation, the Hoover Institute, the American Enterprise Institute, and the Center for the Study of American Business were formed with corporate backing and funding from wealthy individuals, and began constructing serious technical studies and political-philosophical arguments in support of neoliberal policies. US universities were targeted, so that by the 1990s "most economics departments in the major research universities as well as the business schools were dominated by neoliberal modes of thought." Ultimately, Harvey suggests, business learned to "spend as a class".

According to Harvey, businesses acted to capture the Republican Party through an aggressive campaign of donations. This led to the further consolidation of business interests into a unified force, as they had to build alliances to extend their influence beyond the $5000 limit on PAC donations. To retain electoral force, business interests allied themselves with the Christian right, positioning their ills as arising not from capitalism and the "neoliberalization" of culture but from excessive state power (controlled by "liberal elites") that was being used to benefit particular groups (e.g. blacks, women, and environmentalists) at their expense. Harvey argues that the Democratic Party posed little opposition, as it needed to placate corporate and financial interests to maintain funding.

Harvey notes that neoliberal ideas ultimately found significant political influence with the presidency of Ronald Reagan (1981–1989). His presidency brought with it policies of deregulation, "attacks" on the rights of labour, and reductions to social spending. Furthermore, Harvey suggests that around this time the political climate had fundamentally changed: doctrines of "flexible specialization" in labour processes became pervasive and attacks on organized labour more common.

New York City

Harvey places particular emphasis on the management of New York fiscal crisis of the 1970s, viewing it as a series of events that "pioneered the way for [later] neoliberal practices" by the Reagan administration and the International Monetary Fund, and established the principle that "in the event of a conflict between the integrity of financial institutions and bondholders' returns...and the well-being of the citizens...the former was to be privileged".

Harvey outlines how, after a city budget crisis in the 1970s, a bail-out was constructed which attached requirements that amounted to a "coup by the financial institutions against the democratically elected government". These included curbs to municipal unions, cutbacks to social provisions, and austerity measures. Harvey argues that this resulted in a redistribution of wealth from the lower classes to the upper classes, a decrease in the power of workers, and a deterioration to public infrastructure. Furthermore, Harvey maintains that financial institutions "seized the opportunity to restructure" the city by developing a good "business climate", which involved using public resources to build infrastructure for business, providing subsidies and tax breaks to businesses, and restructuring the city around finance.

The neoliberal state

Harvey contends that the neoliberal state positions itself as an arbiter of individual freedom, favoring "strong individual property rights, the rule of law...the institution of freely functioning markets and free trade...[and] a legal framework...of freely negotiated contractual obligations between juridical individuals in the marketplace" as the institutional arrangements to ensure this. However, he believes this is only a "hijack[ing]" of the "ideas of individual freedom to a class project of market freedom and capital accumulation". In practice, the state produces legislation and regulatory frameworks that are advantageous to corporations—sometimes even allowing corporations to draft legislation—which results in the "restoration of class power" to capital. This diminishes the power of labor, and the working class becomes increasingly impoverished. He argues that an increasingly large police state must be established to "deal with the problems arising among discarded workers and marginalized populations". He also argues that neoliberalism is distrustful of democracy because popular majorities are liable to restrict individual or minority freedoms or encroach on the free market; he argues neoliberals instead prefer "governance by experts and elites".

Instability and contradictions

Harvey believes that the neoliberal state is inherently unstable. For instance, he believes neoliberalism promotes unbridled individualism ("There is no such thing as society but only individuals," as Margaret Thatcher put it), which he argues breaks down bonds of social solidarity. Furthermore, he argues that there are a number of contradictions at the heart of neoliberalism. First, monopolies sometimes arise naturally within competitive economies, leading not only to economic inefficiencies but also potentially to exploitation. Second, modern economics recognizes that there are a number of market failures, which he argues the neoliberal aversion to state intervention cannot adequately address. Third, imperfect information is pervasive in markets and can lead to power imbalances. Fourth, neoliberalism fetishizes technological change, which can be destabilizing. Finally, the individual freedom that neoliberalism supposedly holds sacred can lead to strong collective organizations that threaten neoliberal values, and thus neoliberals must resort to strong state intervention to prevent them—thereby utilizing the very forces they condemn. He also argues that neoliberal rhetoric hailing the market as the arbiter of competition and fairness is "negated by the fact of the extraordinary monopolization, centralization, and internationalization of corporate and financial power".

Relation to neoconservatism

"There is a far, far nobler prospect of freedom to be won than that which neoliberalism preaches. There is a far, far worthier system of governance to be constructed than that which neoconservatism allows."

Harvey suggests that neoconservatism has arisen as an "answer" to the instability of neoliberal states. Neoconservatism's emphasis on order and shared moral values counters the "unbridled" individualism and "anarchy of the market" Harvey alleges neoliberalism fosters. Its greater willingness to use coercive state power provides an "antidote" to the "chaos of individual interests". Furthermore, Harvey argues it is "entirely consistent" with the overarching "neoliberal agenda of elite governance, mistrust of democracy, and the maintenance of market freedoms". While Harvey views neoliberalism unfavourably, he believes neoconservatism is "far more threatening".

Geographic development

Harvey notes that neoliberal reform followed a general trend of being "gradually but unevenly put in place during the 1980s and consolidated during the 1990s". He suggests that while the United States and other central neoliberal states were influential in imposing neoliberal reform on foreign countries, the development of neoliberal reform was as much an outcome of "diversification, innovation, and competition...between national, regional, and in some instances even metropolitan modes of governance". He emphasizes that neoliberal reform has been partial and haphazard across nations, and even in countries considered the exemplars of neoliberal reform, like the United States and the United Kingdom, reform was not all-encompassing. For instance, in the UK public services like healthcare and education were immune to privatization. He further notes that while neoliberalism has become a global phenomenon, there are many countries that never implemented neoliberal reform or who were only a part of a limited "creeping neoliberalism", incorporating monetarist policy and reductions to trade barriers but little else.

Harvey identifies four components of neoliberal development, which he believes is embodied by the Washington Consensus. Firstly, the turn to more open financialization. Secondly, the increasing geographic mobility of capital enabled by lower transportation costs, reductions to trade barriers (e.g. tariffs and exchange controls), and free trade agreements. Thirdly, the Wall Street-IMF-US Treasury complex that was able to persuade or coerce developing nations into adopting neoliberal reforms. According to Harvey, a particularly important component of this aspect of neoliberal development was the use of structural adjustment programs by the IMF. Lastly, the global diffusion of neoliberal and monetarist economic ideology. Harvey argues that by the early 1980s Keynesian economics had been mostly replaced by neoliberal economics at the IMF, World Bank, and in US universities. This shifted the focus from full employment and social services to the control of inflation and public finance.

Harvey spends the bulk of chapters four and five discussing the political development of neoliberalism in Mexico, Argentina, South Korea, Sweden, and China.

Mexico

Further information: Economic history of Mexico

The Partido Revolucionario Institucional (PRI) was the sole governing party in Mexico from 1929 until 2000. According to Harvey, they created a corporatist state with a large monopoly public sector and pursued economic policies focused on import substitution and furthering export trade with the United States. When the 1970s global economic crisis came, Mexico was hit badly. The PRI responded by increasing public ownership of enterprise (more than doubling the number of state-owned corporations) and maintaining them as sources of employment. However, these companies lost money and required foreign funding, which came primarily from the United States; foreign debt rose from $6.8 billion in 1972 to $58 billion in 1982. Then Paul Volcker was appointed the chairman of the US Federal Reserve and raised interest rates to combat inflation in the US. This caused the cost of servicing Mexico's debt to rise at the same time a recession in the US (which Harvey argues was also caused by the higher interest rates) lowered demand for Mexican products, causing Mexican state revenues to fall. In August 1982, Mexico declared bankruptcy.

Shortly after declaring bankruptcy, Miguel de la Madrid was elected president of Mexico. To cut down on the debt, he instituted an austerity program and began to sell off public enterprises and use the proceeds to pay down the debt. He accepted a loan from the World Bank in return for structural neoliberal reforms, including further privatization, a reorganization of the financial system, an opening of internal markets to foreign capital, and a reduction in trade barriers. Harvey argues these policies had a devastating effect, decreasing wages, increasing inflation and crime, and leading to declines in the quality of public education and health care.

Carlos Salinas de Gortari was elected president in 1988. He accelerated privatization, further opened the country to foreign direct investment, completed negotiations on a free trade agreement with the United States and Canada (NAFTA) and "couched [his economic development programme] in language close to neoliberal orthodoxy". He quashed labour strikes and, according to Harvey, had several labour leaders convicted of corruption, installing more compliant leaders in their place. Harvey argues that these neoliberal policies again had devastating effects: Mexican farmers were out-competed by subsidized agriculture in the United States, many peasants were forced to sell their land, and the number of unemployed people in cities rose at the same time the number of billionaires across the country rose.

In 1989 Mexico agreed to a partial debt forgiveness program called the Brady Plan, which required further neoliberal reform. Harvey argues these reforms, along with higher interest rates in the US, led to the Tequila Crisis of 1995. Harvey contends that the crisis enabled US capital to purchase a wide range of Mexican firms at fire-sale prices.

In sum, Harvey argues that these years of neoliberal reform amounted to an "attack on labour, on the peasantry, and on the standard of living", and maintains that these reforms led to the entrenchment of elite class power, as a small group of magnates (both in Mexico and out of Mexico) accumulated significant wealth while the rest of Mexico suffered.

Argentina

Further information: Economic history of Argentina

Under military dictatorship, Argentina amassed significant debt and found itself "rigidly locked into a corporatist, authoritarian, and quite corrupt system of governance". When democracy returned in 1992, president Carlos Menem set about liberalizing the economy, opening the country to foreign trade and capital flows, privatizing state-owned corporations and social security, and pegging the peso to the dollar. Harvey argues this increased unemployment and put a downward pressure on wages, while at the same time allowing elites to amass fortunes by buying newly privatized companies.

In 1992 the Mexican Tequila Crisis spread to Argentina, with devastating effects. Harvey recounts that unemployment rose to 18%, the Argentine banking system lost 18% of its deposits, and GDP contracted by 7.6% between 1994 and 1996. The government's debt burden exploded, and in 2000 the IMF bailed out Argentina with a $6 billion loan. However, Argentina still saw massive capital outflows and Argentina was not able to secure another loan. Ultimately, Argentina defaulted on its debt. The government restricted bank withdrawals, regulated all foreign bank transactions, and froze all savings accounts above $3000. Harvey alleges that "$16 billion in purchasing power had been transferred from savers to the banks and through them to a political-economic elite". Following the default, there was significant social unrest, including riots and street pickets.

Harvey argues that following this, neoliberal policies once again enabled the economic power of elites to increase at the expense of the Argentinian working class. Harvey quotes J Salerno of the Ludwig von Mises Institute, who claims that the "confiscatory deflation" that occurred in Argentina amounted to "bank robbery by the political elites". Harvey, citing Velmeyer and Petras, claims the "whole episode reeks of 'a new imperialism: pillage of the economy, growth of vast inequalities, economic stagnation followed by profound and enduring depression and massive impoverishment of the population as a consequence of the greatest concentration of wealth in Argentine history'".

South Korea

Further information: Economy of South Korea § History

Harvey traces the economic history of South Korea from 1950 onward, and argues that the economic successes of the country—which he argues was largely the result of state industrial policy—enabled the capitalist classes to begin a period of neoliberalization beginning in the mid 1980s.

Harvey tells the story like this: under the authoritarian rule of Park Chung Hee, the country (which was still "essentially agrarian" in 1960) began a process of export-oriented industrialization. The state encouraged industrial capitalists to develop factories and conduct business by allowing them to enrich themselves in the process, and continued to encourage them by tapping into government savings, supporting access to foreign markets (particularly the United States) and partnerships with Japanese firms, and encouraging their companies to merger into chaebols. As the chaebols grew and acquired greater power within society, they created an "ever more wealthy domestic capitalist class", enabling them to push for neoliberal reforms that benefited themselves. This included reducing regulations, pushing for easier access to credit from Korean national banks, and off-shoring production to foreign countries like China.

Sweden

Further information: Economy of Sweden § History

China

Further information: Economic history of China (1949–present)

Deng focused on "four modernizations": in agriculture, industry, education, and science and defense.(120) Harvey recalls that these "strove to bring market forces to bear internally within the Chinese economy."(120) He states that the "spectacular emergence of China as a global economic power after 1980 was in part an unintended consequence of the neoliberal turn in the advanced capitalist world."(121)

Accumulation by dispossession

Harvey argues that the "substantive achievement" of neoliberalism has been the redistribution of wealth from the lower classes to the upper classes. He calls the mechanism by which this occurs "accumulation by dispossession", and he identifies four main features of this process:

1. Privatization and commodification: Harvey argues that the "neoliberal project" has sought to privatize and commodify public assets which had previously bee regarded as off-limits to the profit motive (e.g. public utilities, social security, education, and warfare). Harvey maintains that this amounts to a "transfer of assets from the public and popular realms to the private and class-privileged domains."
2. Financialization: Harvey alleges that the deregulation of the financial industry after 1980 allowed the financial system to become "one of the main centres of [upward] redistributive activity through speculation, predation, fraud, and thievery."
3. Management and manipulation of crises: Harvey contends that debt crises were deliberately orchestrated in developing countries to allow the redistribution of assets to foreign owners. He suggests that after debt crises reduce the value of assets, neoliberal reforms (promoted largely through structural adjustment programs administered by international organizations) open them up to foreign ownership. He argues that states and international organizations fine-tune this process, stating: "One of the prime functions of state interventions and of international institutions is to control crises and devaluations in ways that permit accumulation by dispossession to occur without sparking a general collapse or popular revolt".
4. State redistribution: Harvey claims that "the state, once neoliberalized, becomes a prime agent of redistributive policies, reversing the flow from upper to lower classes that had occurred during the era of embedded liberalism". It achieves this, he argues, through privatization, reductions to welfare programs, and changes to the tax code.

Effects

"One persistent fact within [the] complex history...of neoliberalization has been the universal tendency to increase social inequality and to expose the least fortunate elements of society—be it in Indonesia, Mexico, or Britain—to the chill winds of austerity and the dull fate of increasing marginalization...The incredible concentrations of wealth and power that now exist in the upper echelons of capitalism have not been seen since the 1920s. The flow of tribute into the world's major financial centres have been astonishing."

Harvey argues that while neoliberal policies successfully brought inflation under control, their primary effects have been to increase economic inequality, slow economic growth, produce high unemployment, and redistribute wealth from the lower classes to the upper classes. He contends that neoliberal policies meant to increase labor flexibility led to "lower wages, increased job insecurity, and in many instances loss of benefits and of job protections". Harvey notes that this occurred at the same time that social safety nets were reduced, exposing more of the population to impoverishment.(citation needed) Harvey contends that while neoliberal theory praises competition, in practice its policies lead to increased market consolidation.(citation needed)

Harvey argues that the worldwide financialization promoted by neoliberalism acted as capital flows from developing countries to developed one.(citation needed) He also argues that it increases the chances national economic crises blow up into regional or global ones (what he calls "contagious crises"), citing the Tequila crisis, which spread from Mexico to Brazil and Argentina and was even felt in Chile, the Philippines, Thailand, and Poland; the 1997 Asian financial crisis, which spread from Thailand to much of East Asia and Southeast Asia.

Harvey asserts that while "neoliberal state policies with respect to the environment have...been geographically uneven and temporally unstable", they have on the whole had a negative effect on the natural environment. He notes that "neoliberalization has a rather dismal record when it comes to the exploitation of natural resources, that privitization has made it challenging to establish global agreements and principles on forest management, and "the era of neoliberalization...[is] the era of the fastest mass extinction of species in the Earth's recent history".

Harvey argues that neoliberalism "debases" the concept of freedom into a "mere advocacy of free enterprise": "obliged to live as appendages of the market and of capital accumulation rather than as expressive beings, the realm of freedom shrinks before the awful logic and the hollow intensity of market involvements". Harvey contends that "neoliberal concerns for the individual trumps any social democratic concern for equality, democracy, and social solidarities". He suggests that "'I shop therefore I am' and possessive individualism together construct a world of pseudo-satisfaction that is superficially exciting but hollow at its core".

Harvey addresses why it is he believes there is considerable praise for neoliberalism despite what he views as clear evidence it has been harmful. He identifies two primary reasons. First, he notes that uneven geographic development has allowed some areas to see "spectacular" economic growth at the expense of others, masking the fact that neoliberalization has, overall, "failed to stimulate growth or improve well-being". Second, he argues that neoliberalization has been a resounding success for the upper classes by restoring class power to elites, as in the United States, or creating the conditions for capitalist class formation, as in China and India. He further argues that neoliberalization has succeeded in effectively eliminating class from political discourse, despite its centrality to neoliberal aims. However, Harvey argues that the "desire for an alternative to neoliberalization is abundantly in evidence", citing a host of opposition movements like the anarchists, primitivists, religious sects, and left-wing political parties in Latin America. He notes that even a number of prominent economists, including Paul Krugman, Jeffrey Sachs, and Joseph Stiglitz, have become critical of neoliberalism.

Reception

The book has been praised for its survey of the development of neoliberalism. John Schwarzmantel, writing in the journal Contemporary Political Theory, said it is "a formidably well-documented survey of how the ideas and practices of neoliberalism have conquered the world", called it "an impressive analysis of neoliberalism", and praised it for its global scope. Eric P. Perramond, writing in the journal The Professional Geographer, called it a "useful template and historical time line for understanding the evolution of this loosely organized [neoliberal] school of thought." Michael J. Thompson, writing in the democratic socialist magazine Dissent, called the book "deeply insightful, rewarding and stimulating" for Harvey's "virtuosic" "ability to thematise the imperatives of the most recent manifestation of capitalist accumulation".

It has also been criticized for not placing enough focus on the development of neoliberal ideas. John Schwarzmantel, writing in the journal Contemporary Political Theory, notes that "Harvey does not give an extended analysis of the ideas of neoliberalism". Eric P. Perramond, writing in the journal The Professional Geographer, states that "little treatment is given to the changes between nineteenth- and late twentieth-century liberalism".

Criticism

The book has been called a one-sided Marxist analysis. Ritzer Grey, writing in the American Journal of Sociology, alleges that Harvey's "neo-Marxian analysis" does not provide a "balanced appraisal of neoliberalism". Michael J. Thompson, writing in the magazine Dissent, notes that the book "deviates little" from Harvey's "enduring perspective...which echoes orthodox Marxism".

Further Reading

• For a short summary of neoliberalism: Steger, Manfred B.; Roy, Ravi K. Neoliberalism: A Very Short Introduction. Oxford University Press. ISBN 9780199560516.
• For a survey of the intellectual development of neoliberalism: Jones, Daniel Steadman (2012). Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics. Princeton University Press. ISBN 978-0-691-15157-1.
• For a survey of early neoliberal thought and debate: Mirowski, Philip; Plehwe, Dieter, eds. (2009). The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective. Harvard University Press. ISBN 978-0-674-03318-4.
• For a favorable analysis of neoliberalism: Yergin, Daniel; Stanislaw, Joseph (1998). The Commanding Heights: The Battle for the World Economy. Free Press. ISBN 978-0684835693.
• For a non-Marxist critique of neoliberalism: Brown, Wendy (2015). Undoing the Demos: Neoliberalism's Stealth Revolution. Zone Books. ISBN 978-1935408536.